Strong Boards, CEO Power and Bank Risk-Taking

This study examines the relevance of bank board structure on bank risk-taking. Using a sample of 212 large US bank holding companies over 1997-2004 (1,534 observations), this study finds that strong bank boards (boards reflecting more of bank shareholders interest) particularly small and less restrictive boards positively affect bank risk-taking. In contrast, CEO power (CEO's ability to control board decision) negatively affects bank risk-taking. These results are consistent with the bank contracting environment and robust to several proxies for bank risk-takings and different estimation techniques